Freelancer Services As Reported on 1099 Forms
One of the odder freelancing-related myths that I have seen floated is
that 1099 forms, and even 1099-MISC forms in particular, are meant
to document payment for services only. (They are rumored to be meant
to document payment yet more narrowly: for services when it will make
the payee subject to self-employment taxes but not otherwise, this despite
the explicitly noted possibility that certain employees may need the
simultaneous filing of both W-2 and 1099-MISC by their employers.)
Why is it such an odd one? The detailed 1099-MISC instructions at
https://www.irs.gov/pub/irs-pdf/i1099msc.pdf are replete with direct
refutations of the notion. Most salient is the listing (in the instructions
for box 4, “Federal Income Tax Withheld”) of potentially applicable cash
boxes other than box 7. This legendary box will not necessarily need to
be filled in at all, given the potential applicability of the others: any to, in
principle, all of 1, 2, 3, 5, 6, 8, 10, or 14 (as well as 4 itself, of course).
In contrast to the payment for services (something that typically belongs
in box 7), certain reimbursements constitute likely examples of items that
should go in box 3, partly because they will likely not be subject to self-
employment tax. (In the 1099-MISC instructions, take a look at page 8,
the final box 7 paragraph, and also page 5, first box 3 paragraph.)
Interestingly enough, even the use of box 7 itself does not necessarily
involve the provision of services. The instructions read in part:
"Include oil and gas payments for a working interest, whether or not
services are performed"; fish purchases for cash and certain travel
reimbursements are also cited. Of course, box 7 is named
"Nonemployee compensation" rather than quite a bit more pointedly:
It is because the broader interpretation is what is wanted, even with just
this box.